USMCA brings administrative improvements, housing and construction plunge, Texas rail terminal starts operations
Start of USMCA on July 1 to bring administrative improvements
The United States-Mexico-Canada Agreement (USMCA) set to go into effect on July 1, 2020 will bring improvement to chemical industry trade at the administrative level but not major changes, the CEO of the Chemistry Industry Association of Canada Bob Masterson said.
“In the chemistry sector I wouldn’t say it’s irrelevant. That’s too strong. But we have had exceptionally free trade in chemicals since Nafta (North American Free Trade Agreement) was introduced” in 1994, Masterson said.
With USMCA “we looked for opportunities to streamline regulations to make things more common, things like treatment of empty rail cars,” he said.
There was no change to “the basic tariff structure for chemicals because there is no tariff for chemicals,” Masterson added.
Representatives from the chemical industry from the three countries expressed satisfaction in December 2019 about the result of the USMCA negotiations.
Legislators in the Mexican Senate, the first to ratify the accord, said in December it gave confidence and helped bring clarity about changes in the country’s labor laws that were part of a May 2019 Labor reform.
House construction, automotive decline sharply in May
Home construction and auto sales showed deep plunges in May from the same month in the previous year as cities across the United States continued to endure a lockdown to try to contain the spread of Covid-19.
The U.S. Census Bureau and the U.S. Department of Housing and Urban Development (HUD) said on June 17 that privately owned housing starts posted in May a 23% on-year decline.
Private housing starts fell in May to a seasonally adjusted annual rate of 974,000. This is 23% below the May 2019 rate of 1.3 million, the bureau said.
Privately owned housing units authorized by building permits in May posted a seasonally adjusted annual rate of 1.2 million, a 14% increase from April but 8.8% below the May 2019 rate.
Building permits are issued prior to construction yet projects may be abandoned or see design changes than need more permits. Housing starts can be a better indicator as it tracks the actual start of constructions.
Separately, ALG Inc., a subsidiary of True Car, projected on May 26 that new vehicle sales will reach in May nearly 1.1 million units, a 32% on-year decline.
The seasonally adjusted annualized rate for total light vehicle sales for May is an estimated 11.8 million units, added ALG Inc.
Excluding fleet sales, ALG expects U.S. retail new cars and light trucks May deliveries to decline 21% on-year to about 1 million units.
“Fleet sales for May 2020 are expected to be down 78% from a year ago,” added the subsidiary of True Car, which has estimated used car prices for over 50 years.
The automotive industry demands chemicals most notably polypropylene, polyvinyl chloride (PVC) and a dozen others, from seat cushioning and flame retardants to paint coatings. Construction increases demand for chemicals such PVC for tubing and fixtures, as well as expandable polystyrene for insulation.
A slowdown in demand for durables has led to petrochemical facilities running at reduced rates or to the deferment of some projects.
New rail terminal starts operations in southeast Texas
Iron Horse Terminals (IHT) said on June 17 that its new Beaumont, Texas rail terminal started operations after completing the connection to the Houston Rail Line served by Union Pacific (UP) and Burlington Northern Santa Fe (BNSF).
“IHT is located on 500 plus acres in the heart of the southeast Texas petrochemical industry,” the company said. The rail connection was the final step in construction.
The rail terminal includes 4,500-railcar storage, a 75-car maintenance facility, 25 acres of trans-load operations, rail-served warehousing, and plastics repackaging facilities, it added.
Customers include refiners, chemical plants including plastics producers, aggregate and ready-mix suppliers, as well as construction projects. The terminal construction took four years.
"Our plan is for IHT to become an integral part of the industry in southeast Texas, said IHT’s president Steven Birdwell.
“The size and location of the facility (…) will allow IHT to create efficiencies in the local industry's supply chain," he added.
U.S. production of plastic resins declines 2.8% in April
U.S. production of plastic resins fell in April 2020 by 2.8% from the same month a year earlier, the American Chemistry Council (ACC) said on June 4. Specialty chemicals took a deeper year-over-year decline.
Sales and captive (internal) use of major plastic resins totaled 7.3 billion pounds during April 2020, a 2% on-year decrease.
However, the cumulative Jan.-April data stills shows an on-year increase.
Jan.-April production was 30 billion pounds, a 4.3% on-year increase. Jan.-April sales and captive use was 30.2 billion pounds, a 3.8% increase from 2019.
The ACC reported on June 19, 2020 that U.S.specialty chemicals volumes fell on-year by 14% in May.
Specialty chemical volumes stood at 96% of their average 2012 levels in May. This is equivalent to about three million tonnes, it said. The year-to-date decline for Jan.-May was 6.6%.
Rubber processing specialty chemicals were hit hardest in the year-to-date comparison with a 24% decline. Electronic chemicals managed a 6.3% increase year-to-date from 2019 even as nearly all categories were lower.
Mexico’s Orbia pauses efforts to divest Vestolit
Orbia Advance Corp., formerly known as Mexichem, paused efforts related “to a potential divestiture of Vestolit,” its polymer business group.
The Mexico-based company “is prepared to wait for the right environment,” Orbia said a late May notice to investors.
Orbia had announced plans to divest the unit on Jan. 10.
By Petrochemical Update